SALES: August turned out to be an ugly month for U.S. vehicle makers, and the year may be bad as well.

By Dee-Ann Durbin

THE ASSOCIATED PRESS

DETROIT – Consumers were in no mood to buy a car this month as they faced rising mortgage payments and roiling financial markets, and some analysts already predict 2007 will be the worst year for U.S. auto sales in nearly a decade.

August auto sales, which will be announced by the automakers on Tuesday, are expected to fall

5 percent compared with August 2006 numbers, said Jesse Toprak, chief analyst for the automotive research site Edmunds.com. Toprak said automakers boosted sales with incentives in the middle of this month, but that wasn’t enough to overcome uncertainty in the housing market.

Toprak predicts Ford Motor Co. will be the hardest hit in August, with double-digit sales declines. Toprak said Ford relies heavily on pickups, a segment that saw a 6 percent decline in the first seven months of this year as housing starts faltered. Ford and General Motors Corp. have also cut back on incentives, which have propped up sales this summer for competitors like Toyota Motor Corp., Toprak said.

Ford Chairman Alan Mulally said the automaker may need to fine-tune its recovery plan due to the combined effect of the subprime mortgage market collapse and high gas prices.

“It’s all about the customer and their confidence,” Mulally said last week during a dinner with reporters. “It’s just clearly a tightening of the big-ticket purchase items. But we’re going to continue to react to that and anticipate it and adjust our production accordingly.”

Poor August sales would cap a dismal summer for the industry. Sales in June and July were at the lowest rate for a two-month period since 1998, when a 54-day strike crippled General Motors Corp.

The declines may also lead to costly production cuts, which could be announced on Tuesday as well. GM already has cut scheduled overtime through the rest of this year at six plants that make large sport-utility vehicles and pickups, and on Thursday the automaker announced it will cut 1,200 jobs at a Canadian pickup plant in January.

Charles Chesbrough, a senior economist with the automotive forecasting company CSM Worldwide, said consumer debt has risen 13 percent over the past five years, triggered by rising adjustable rate mortgages. At the same time, a weak housing market and declining home values are dampening consumer spending.

CSM forecast U.S. sales will total 16.2 million in 2007, or 350,000 fewer vehicles than last year. That would be the lowest annual sales level since 1998 and more than 1 million vehicles lower than the peak of 17.3 million in 2000, according to Ward’s AutoInfoBank.

George Magliano, director of North American auto industry research for the consulting firm Global Insight, said higher incentives and an increase in rental car sales in the second half of this year could improve the outlook for automakers, but he believes credit companies will hurt sales by tightening standards for auto loans.

Magliano said he doesn’t expect a recovery to gain momentum until 2009.

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